If Ireland defaults,what happens?

Freiheit

A lot of commentators say that Ireland simply can't afford the 'bail out' and should prepare for an 'orderly ' default. What would the result be if we did?.

You know though I'm finding the news so depressing, feel like leaving all news mediums off, including abstaining from newspapers....so much doom...I'm starting to feel hopeless....:(...and I'm usually quite a positive person......

mike65

Well no sense to force a default by charging too much for the loan, so I don't see it happening. However as you ask, Ireland would be shut out of the markets, so no borrowing. The country would have to live on its income which well short of expenditure, the National Pension Fund could be used up that would give Ireland about a year of grace before penury of several years.

Then at some point a deal would be struck to allow Ireland to re-enter the markets.

Liberalbrehon

The government living within its means and less debt. Default seems like a necessary evil and may even turn the country around.

tHE vAGGABOND

We just hand back the keys and wait for them to evict us

Sticky_Fingers

mike65 wrote: »

Well no sense to force a default by charging too much for the loan, so I don't see it happening. However as you ask, Ireland would be shut out of the markets, so no borrowing. The country would have to live on its income which well short of expenditure, the National Pension Fund could be used up that would give Ireland about a year of grace before penury of several years.

Then at some point a deal would be struck to allow Ireland to re-enter the markets.

The markets would soon come around in short order, they don't hold any grudges and without the banks dragging us down coupled with a wholesale restructuring of the Irish government/SC and other institutions we would be quickly on the way to some sort of a recovery. As it stands we are being offered even more debt by the ECB so that the banking institutions in the larger member states will not have to take the hit. They are proposing to transfer the possible liability their own citizens would face if their banks failed onto the shoulders of the dopey Irish.

The way I see it is accept the bailout and we get more of the same crony capitalism and crooked greasy politicians or default and start again, learning from our mistakes and ensuring that they never happen again.

martinn123

Freiheit wrote: »

A lot of commentators say that Ireland simply can't afford the 'bail out' and should prepare for an 'orderly ' default. What would the result be if we did?.

You know though I'm finding the news so depressing, feel like leaving all news mediums off, including abstaining from newspapers....so much doom...I'm starting to feel hopeless....:(...and I'm usually quite a positive person......

My advice, cheer up, it's bad, but it's not a graveyard......we will get out of it.

The country has gone through worse, despite the doom and gloom our economy is still relatively strong, not everyone is out of work, we have a huge rate of savings, ok, the banks are in trouble but we have friends out there, who will not let us sink, UK, Sweden, Norway, are all willing to help, not counting EU, IMF, etc.

The next few months will see some changes which will be welcome, the gravy-train that has been politics will be cleaned up, watch Brian Cowan, apply for his Ministerial Pension, and the keys of his car for life, Mr Chopra will just say NO.
civil service pensions linked to annual rates of increase, no more.

The next few months , indeed years will be difficult, but not terminal.

Default, it will not happen, the EU cannot have a situation which would harm the Euro.

Cheer up, the sun will still shine,

mike65

Denmark is also thinking about a bilateral loan.

Inquitus

If the terms of the bailout dictate we draw down the 85bn from day 1 at a 5% interest rate, then that's 1,000 euros a year per man, woman and child in reduced services or increased taxation just to service the interest. Is that sustainable? If we wanted to pay off 5bn a year, that's 2,000 euro for every man woman and child in reduced services or increased taxation, in the first year, slowly declining over the 17 years it would take to pay off.

The only way that will shrink by itself is if Growth + Inflation > 5% which doesn't look too likely in the short to medium term.

Is default almost guaranteed at some point in the future?

Dan_Solo

Inquitus wrote: »

Is default almost guaranteed at some point in the future?

Yes. That's almost the raison d'etre of the IMF. They'll take us for every penny we have and we'll still default as it simply isn't possible for the public purse to cover a private debt that large.
Bank guarantee? Guarantee we'll be paupers forever more like.

Avgas

It is not 5%...it is more like 7% or 7.044% to be exact . See: http://www.irisheconomy.ie/index.php/2010/11/23/efsf-charging-7/

This is not cheap credit we are getting..even if it still better than 8-10% the markets were in theory willing to buy our bonds from...(but not in practice).

Why is everyone missing the big news-the Spanish and Portuguese bond auctions have moved way upwards. Contagion seems to be spreading fast.

This is 1929 total crash territory...for the Eurozone.....please somebody post in an authoritative reply that it will all be grand.......

"Before I go whence I shall not return, even to the land of darkness and the shadow of death; A land of darkness, as darkness itself; and of the shadow of death, without any order, and where the light is as darkness."

Book of Job, 10:21-22.

digme

Ireland better default fast.
Strike against austerity cuts brings Portugal to a halt

Scofflaw

Sticky_Fingers wrote: »

The markets would soon come around in short order, they don't hold any grudges and without the banks dragging us down coupled with a wholesale restructuring of the Irish government/SC and other institutions we would be quickly on the way to some sort of a recovery. As it stands we are being offered even more debt by the ECB so that the banking institutions in the larger member states will not have to take the hit. They are proposing to transfer the possible liability their own citizens would face if their banks failed onto the shoulders of the dopey Irish.

The way I see it is accept the bailout and we get more of the same crony capitalism and crooked greasy politicians or default and start again, learning from our mistakes and ensuring that they never happen again.

The markets do have long memories, though. Argentina has been unable to issue any euro or dollar denominated debt bonds since their default in 2001, and their peso-denominated bonds trade at 9.8%.

Also, I'm afraid, there's no real sign that the majority of the country want to get rid of our crony capitalism and crooked greasy politicians.

cordially,
Scofflaw

Dan_Solo

Scofflaw wrote: »

Also, I'm afraid, there's no real sign that the majority of the country want to get rid of our crony capitalism and crooked greasy politicians.

What's that about the "government we deserve".
I don't hear many people here admitting they voted FF in the last election despite them having every crook from Charlie to Bertie in the party.

Doesitmatter?

This has probably been done to death already but, could someone explain to me why a large part of the bail out is going to be poured in to the banks to pay back people who took a punt on Irish banks and now that their investment has gone tits up, its us who has to pay for it?
If I or you invest in a company and they fail, tough sh!t. whats different?
It all sounds like a bad novel. You could easily smell a conspiracy here with another country or group of mysterious investors wiping out an entire nation (financially) by engineering the whole boom to bust bubble and getting themselves out just before the crash.
It's all too farfetched, or is it??:eek:

My.testicals

I have been thinking the very same thing. what can they really do?

If anyone of us hard working people default on a payment to one of the financal organisatons more than likely the most that will happen is that the person will serve a bit of time in prison..

Now me for one, well i would not be crying my eyes out if a few of the gangsters we have runningthe country had to do a bit of time.

If someone defaults on a payment to an undesireable person(eg loan shark/drug dealer) you could get your head kicked in,or maybe they would storm into your house and take something valuable to make the payment.. again I wouldnt shed a tear if that happend to our "leaders"

So can someone please tell why we cannot come out of the euro, start a totally new currency with new people in charge that will do the right things and consult people that know about financial matters before they make a decision.

Then we would slowly make our way back and we could make an agreement with the rest of them to pay back a certain amount every week but spread the payments out longer, just like I and many many thousands of people have to do every week in this country.

Scofflaw

Dan_Solo wrote: »

What's that about the "government we deserve".
I don't hear many people here admitting they voted FF in the last election despite them having every crook from Charlie to Bertie in the party.

It's amazingly difficult to find anyone who admits to having voted for Fianna Fáil, which is curious when you consider how many people did.

What's disturbing is when you extrapolate that to the coming election.

cordially,
Scofflaw

Freiheit

I'm no economist but I feel that investors in Irish banks/bonds should take their losses and at least then we could start to grow after the bust?.....Whereas this will extend the depression over 50 years?....for the benefit of just a few oligarchs?.

I know my world won't end but I've no faith in Irish nor external governance....seems to be done to save the banks and their benefactors....I'm very sad...I had been pro-European, much of the equality agenda has been due to European influence, but feel very disillusioned now..

KyussBishop

I really have not been keeping track of events on any of this for a long time, but have been reading up on it more recently.

Part of what I've read, is (summarizing, probably inaccurately) that lax regulation laws in Ireland allowed banks to take greater risks, risks that were blocked by more sensible/strict regulations in other countries.

So, foreign banks (most notably from Germany?) came to Ireland to make these high risk ventures (knowing the risks, and knowing they are evading their own regulations/laws), and now that everything is in meltdown, they are trying to abdicate responsibility and shít out their bad debt onto the Irish people? (bad debt which may amount to a very significant % of our overall debt)

How accurate is this information I've read, and how much money does this specific issue amount to?


If this is accurate, is defaulting the only way to tell these banks to go fúck themselves?

Laois_Man

martinn123 wrote: »

Default, it will not happen, the EU cannot have a situation which would harm the Euro.

With respect - Nonsense!!
Our default is a nailed on certainty! But EU/IMF are not giving us the 85 Billion in one swoop - It's over 3 years! Which means, if we want to use the full 85 Billion (which we will....and then some), we cannot default until we have it all...in 2014 and maybe beyond!

In the meantime, they're cutting our deficit by 15 Billion - but, to service this debt expenditure (just the 85 Billion, not including the rest of our debt), our spending has to increase by about 6 Billion per year to service the interest alone....so the deficit is not being cut by 15 Billion at all.

To answer the OP question....we will be left to live of of our 32 Billion income after 2014...which by then will surely be significantly less than the 32 Billion it is now!

To the person who claims UK, Sweden, Denmark etc are being our "Friends"....wise up!! Theyy want to loan us money so that THEY don't have to pay!!

bd2012

what does everyone think of the argument put forward on the vincent browne show last night by brian lucey and others, i.e. that europe is so afraid of contragion disrupting the euro zone that we can threaten to default (referred to as a nuclear weapon on the show ) in order to negotiate a lower more feasible rate of interest?
any thoughts?

http://www.tv3.ie/shows.php?request=tonightwithvincentbrowne&tv3_preview=&video=29656

Psychedelic

I've seen a good few different economic commentators say Ireland would be better off if we default as we just cannot afford to pay back the bailout money. So I am just wondering what consequences there would be if we do this? How would things likely to be played out?

From my understanding, we would effectively be saying fuck you to the German, French and UK banks that we owe money to, so could those countries stop trading with us, in terms of buying our exports and supplying us with imports? Also, surely they would never lend to us ever again?

later12

Massive inflation, a bleeding of foreign investment (more like bloodletting), we would be a financial leper - far far worse than is the case now or in the projected future. We would bring the euro down, if we weren't kicked out of it by then

It's not an option.

Drumpot

I have seen that aswell . .

You gotta love them . .

Populist politics got us where we are, dont think for a second that populist economic waffle will do any differant . .

Dont get me wrong, Im not exactly sold on the bailout and I am very very cynical with the EU's motives.

But until I see a credible, comprehensive and well put together proposal, I will presume that tv pundits are nothing more then the Jordan's of their profession. Say whatever you can to get on tv.

We should join the Dollar, no no have our own currency, no maybe join the sterling . . We should do what Iceland did in parts or sweden or maybe somebody else . .

There is always snippets of what we should or should not do, but never intricate discussion or proper questions on their views (as the presenter of the tv show has no clue what he is being told or talking about!).

Heres a question that pretty much sums up how I feel about tv pundits. Throughout this whole scenario and since they have been on tv, I have never seen 100% concensus on anything in terms of the economic decisions that have been made or should of been made etc. The reason is because economics in capitalism is not something that can be predicted with so many external factors (as we are seeing) that can scupper even the best laid plans. Put simply, there is no way of guaranteeing that the correct decisions will work.

Jaysoose

What do you mean if?

We dont have the money to pay for ourselves....its already happenned.

later12

We have not defaulted on our sovereign debt, so the word 'if' absolutely arises.

Freiheit

Our government has sold us into slavery for generations. The E.U. and I.M.F. are not here for our welfare, merely to save the Euro and their banks.... . A default,live within our means and eventual growth would be much better.... I think Ireland should leave the Euro and default.....

Jaysoose

Sovereign debt...bank debt...bondholders... we are broke no matter what way its painted.

later12

No, there is a big difference. Defaulting on sovereign debt sends us into the wilderness - you think things are bad now? You haven't seen anything nearly as bad as if we were to default on our debt.

Again, we have not defaulted; defaulting is not an option.

wylo

later10 wrote: »

No, there is a big difference. Defaulting on sovereign debt sends us into the wilderness - you think things are bad now? You haven't seen anything nearly as bad as if we were to default on our debt.

Please elaborate? What in the detail are the consequences of defaulting on sovereign debt, ok so the markets dont want to go near us so we must pay our own way ( baring in mind we have still have a bit of cash), MASSIVE dole cuts and PS cuts.
We go to the punt ,and inflate like mad, doesnt this not help our exports?

How much does this country rely on imports , thats the other big question.

We have a clean slate. Is there any way we could default on our sovereign debt but still take a loan from IMF?

irishh_bob

later10 wrote: »

Massive inflation, a bleeding of foreign investment (more like bloodletting), we would be a financial leper - far far worse than is the case now or in the projected future. We would bring the euro down, if we weren't kicked out of it by then

It's not an option.

we should be threatening to default , the germans want us to pay for the wreckless lending of german ( and british ) banks to irish banks , we need to tell them that unless we get an interest rate of 1% on our bailout ( loan ) , we will press the nuclear option and watch the eurozone crumble , our one trump card is that we have nothing to loose at this stage as this loan cannot be paid so default is inevitable one way or another under the present terms being offered

a148pro

if we had not offered the original guarantee, but instead offered to guarantee any future loans would we not be alright?

I mean surely to god the markets make decisions based on making profits. if we had defaulted on the original bank bonds they would not have treated us as pariahs for long because there would be money to be made by loaning to us. and our ability to pay back would be intact.

instead we guaranteed all the old loans, went up the swanee and the markets didn't believe we would be able to pay back future loans so the yields went up and up, forcing us to the IMF / EU.

so what I'm asking is if the idea that if we defaulted at all we would be shunned not a little naive? if we could pay back loans people would still be loaning to us, regardless of whether we had burned (pre guarantee) bond holders?

Atilathehun

We do not need to default IF, we have the BALLS, not to BLINK, in the current negotiations with ECB / IMF.
Any interest rate attached to monies advanced to help solve the combination of bank and sovereign debt, MUST, at a level which does NOT make the total debt unservicible.
If they do not offer the money, at that interest rate say 2%, we simply say thanks but no thanks, we now hereby default. The consequent contagion will probably take down the euro. That would surely bring Napoleon Sarkozy and Kaiser Merkel, come down off their high horses.

Ok, we lived it up on loose credit. BUT, the ground source of that credit was in Frankfurt, Paris and London.

Our problem is certainly their problem. We must take some nasty medicine for our part in the fiasco. BUT, no need to take a suppository, when an oral tablet is adequate.:cool:

Cavehill Red

later10 wrote: »

Massive inflation, a bleeding of foreign investment (more like bloodletting), we would be a financial leper - far far worse than is the case now or in the projected future. We would bring the euro down, if we weren't kicked out of it by then

It's not an option.

What a load of rubbish.

I've said this repeatedly but it seems some people still haven't heard - Spain has defaulted umpteen times and always been back to the markets shortly afterwards.
Uruguay and Turkey defaulted repeatedly during the last century, and yet were able to go back to the markets within a short time. When Argentina last defaulted, they were back in the markets within months.

The 'financial leper' argument is BS scaremongering of the highest order, sprung on the Irish people to scare you into thinking you have no options by the very people seeking to be bailed out by this unpayable loan.

We WILL default if we seek to pay the bank debts. Our sovereign debts are entirely sustainable and well within market norms. Though we must bring the deficit down.

That means we need to default on the bank guarantee so as to protect our sovereign debt reputation.

Bob_Latchford

1% above what the Germans can borrow at should be the maximum, something like 3.5% tops.

"Our friends" in europe should not be profiting from Irelands troubles when it ultimately is in their best interest to

Dan_Solo

Is it too late or simply impossible to renege on the bank guarantee? That wouldn't be defaulting on our foreign debt as they're domestic banks? All the debts that who's performance was lied about should also be returned, as with fraudulently overpriced NAMA acquisitions.
Then let the banks and developers go bankrupt. The sovereign debt should not be involved in any way.

Bob_Latchford

Seems there is a "sovereign obligation" after a a gaurentee has been given by the state. .

Seems Dubai is yet another country that has been down this road

http://www.reuters.com/article/idUSTRE5B105320091202

Entities related to the government but not supported by it — especially Dubai World, which is weighed down by borrowings against questionable real estate projects — are less fortunate. Dubai's finance minister is right to say investors should have drawn a clear line between the two.

Cavehill Red

The likes of Dubai World were at best the equivalent of our semi-states. There's no equivalence between that and the Irish banks, which were and are clearly separate entities to the state.

The Irish state only took equity in the banks when it provided emergency funding. Prior to that, they were entirely separate autonomous and private entities. Even now, they are run by their own management entirely separate to government.

There is no bleeding of the border between state and non-state entities here. AIB, Anglo Irish and the rest are NOT arms of the Irish state and are NOT aspects of our sovereign debt, except insofar that Comical Lenny made them so by guaranteeing them.

Well, the time has come to stop guaranteeing them.

Dan_Solo

Bob_Latchford wrote: »

Seems there is a "sovereign obligation" after a a gaurentee has been given by the state. .

Seems Dubai is yet another country that has been down this road

http://www.reuters.com/article/idUSTRE5B105320091202

OK, but surely the state can't be liable for fraudulently assessed assets that it has guaranteed? Even if not all the bank guarantee can be returned, surely NAMA can be reversed as there is no outside interest? Plenty of outright lies on the valuations of assets there too.

Bob_Latchford

Just saying even with semi state there is wiggle room with sovereign obligations.

No expert so believed everything I had heard up until now was that we are saddled with bank debt when many countries have been here before and cut the private enties / semi state lose

Absurdum

Cavehill Red wrote: »

Well, the time has come to stop guaranteeing them.

Can anyone explain how this can happen? Is it simply a matter of declaring the guarantee null and void or is there a legal framwork involved? Or are FF simply too stupid and/or stubborn to take this route?

Dan_Solo

Absurdum wrote: »

Can anyone explain how this can happen? Is it simply a matter of declaring the guarantee null and void or is there a legal framwork involved? Or are FF simply too stupid and/or stubborn to take this route?

Stupid? Stubborn? Didn't you forget to put in a "corrupt" option?;)

Sir Oxman

mike65 wrote: »

Denmark is also thinking about a bilateral loan.

NIB--->Danske Bank

Bob_Latchford

There was a Icelandic guy on here the other day saying how they did it there and america did it to washington mutual

http://en.wikipedia.org/wiki/Washington_Mutual

They strip out what they want from the failing banks and move that to a new bank. The old bank is left with the debts and an IOU and allowed to fail

I am sure it gets messy in courts, but worth it

Absurdum

Dan_Solo wrote: »

Stupid? Stubborn? Didn't you forget to put in a "corrupt" option?;)

I wanted to keep it short and sweet, otherwise I'd be typing insults all night

Dan_Solo

As for returning debts to the banks and then having them collapse, I'd much rather lose all my savings now than lose ten times the amount in taxes and pay cuts over the next 50 years.

Cavehill Red

Absurdum wrote: »

Can anyone explain how this can happen? Is it simply a matter of declaring the guarantee null and void or is there a legal framwork involved? Or are FF simply too stupid and/or stubborn to take this route?

Simple issue of passing legislation in the Dail. Obviously Fianna Fail won't do it (without a gun at their heads) so that's why we need an election BEFORE any deal with the IMF/EU.

Absurdum

I only caught the end of Prime Time but Michael Noonan seemed somewhat open to the idea of some sort of default...some hope perhaps?

Dan_Solo

Absurdum wrote: »

I only caught the end of Prime Time but Michael Noonan seemed somewhat open to the idea of some sort of default...some hope perhaps?

I don't think we really want a default though. We want the public finances to be rid of the Fianna Fail transferred private debt. Then there's no need to default.

th3 s1aught3r

Watching VB. It sounds like we are going down the default road. Disorderly default doesnt sound like a nice option

marglin

If only he were in government. If only literally anybody else was at that negotiating table. A monkey with a rudimentary ability to communicate(making a noise meaning no or something) could do better. The discussions(in my head)

IMF/EU: Here lads ye're in trouble, sure look we'll save ya cos we're such good pals, ye have to pay interest of about 5% though, is that ok?

FF: Ah jaysus lads, that's awful sound, we really could do with the few bob. Its kinda for our mates at the banks but no one will lend them anything isnt that awful? 5% is very reasonable, joining the euro and then letting ye decide whats best for us is the best thing we ever did. that cheap money ye gave us a while back was great, we had some session, didnt we boys?

Rest of FF: ah we did thats for sure and everyone loved us for throwing such a good session, especially our mates the developers, jeez they loved it.

IMF/EU: the only thing is will everyone here like it? someone said to us on the way over ye're moving out in a few weeks, will this deal still be good?

FF: Ah sure f**k them, arent we only doing whats best for everyone, I mean do they not realise what would happen if the banks cant pay back their loans, I mean they owe some dodgy lads like. No dont worry lads it'll stick alright and everyone will stick with it forever.

IMF/EU: Ah you're dead right to be fair, fair play to ye lads. Just make sure ye do actually pay it back though. I heard someone whispering about defaulting, now ye'd want to stop that kind of talk.

FF: Don't worry we'll pay ye back alright, every penny, well sure dont we have loads of kids, they'll have jobs someday(Rest of FF looks nervously at each other), they'll give it back...or their kids at the very latest.

IMF/EU aside to each other: Thank God we got that through, if they default on the banks debt, we are all absolutely f**ked, our stupid mates in our banks were the ones who gave them the money. The last thing we want is our houses turning into a kip like this. Let's get out of here, here IMF you stay, you're big and scary keep an eye on them, if they step out of line break someone's leg or just take their valuables, you're good at that. Here that was way easier than we thought it would be, they're awful eejits arent they?
Eh i think the ugly one with glasses is drunk, lets go, Im german like, I dont 'do' parties.

IMF/EU exit to stage left, rafters fall on stage. curtain closes, then goes on fire. The fire extinguishers are empty. FF notice none of this as Cowen is singing a great aul ballad about Offaly.

Bob_Latchford

I dont understand why IMF/ECB dont see that their route could lead to default. They have the figures & experience of these situations